Cabinet approves pension reforms

By Shih Hsiu-chuan / Staff reporter

The Cabinet yesterday approved amendments to the pension systems for military personnel, public school teachers and private-sector workers, which, along with proposed reforms to the pension system for civil servants made by the Examination Yuan earlier this month, completes its whole package of reforms.

Minister of National Defense Kao Hua-chu (高華柱), Minister of Education Chiang Wei-ling (蔣偉寧) and Council of Labor Affairs Minister Pan Shih-wei (潘世偉) held a press conference after the meeting to clarify what Premier Jiang Yi-huah (江宜樺) called a “major policy” that will have “profound effects on society.”

With the country facing a low birth rate and rising life expectancy, “we have to act quickly to overhaul the cash-strapped pension fund systems before the problems get worse,” Jiang was quoted by Executive Yuan spokesperson Cheng Li-wun (鄭麗文) as saying.

The amendments were basically based on the proposals put forward by a Cabinet-level task force led by Jiang on Jan. 30, with some revisions made after consultation with concerned groups over the past few months.

For the labor pension system, Pan said the Cabinet opted to adopt the second version of the proposed reforms, instead of the first version, which would have seen payments to retirees drop by up to NT$5,308 (US$178.42) per month compared with the current system, or a total of NT$891,744 over a 30-year period.

Under the second version, the monthly payments would decrease by up to NT$1,000, or 5 percent lower than the current system, or an average of NT$500 per month.

At the same time, insured workers — numbering about 9.8 million — will have to pay higher premiums.

Currently, the contribution rate of 8 percent is scheduled to rise by 0.5 percentage points every year until it reaches 9 percent in 2015, followed by an increase of 0.5 percentage points every two years until it reaches 12 percent in 2027.

If the amendments pass the legislature, from 2027 onwards, the rate will continue to rise by 0.5 percentage points every year until it reaches 18.5 percent if the fund’s financial status is not strong enough to ensure that it keeps on running for another 20 years, Pan said.

The January proposal suggested that the rate be raised until it reaches 19.5 percent by 2036.

Pan said that the amendments also call for allocating money to cover the deficit in the pension fund on an annual basis and that the government would assume ultimate responsibility for the pension payments if the fund goes bankrupt.

The Examination Yuan on April 11 approved amendments to the Civil Service Survivor Relief Act (公務人員撫卹法) to cap the income replacement rate of retired civil servants at 80 percent, impose a higher premium rate, reduce pension payouts and extend the retirement age.

The amendments approved by the Cabinet yesterday to reform pension systems for military personnel and public school teachers were drafted in a similar vein.

In response to complaints filed by senior-high school teachers against the January proposal that called for adopting the “rule of 90” — under which a teacher can only retire if their age and years in service add up to 90 — the Cabinet yesterday said that the “rule of 85” — originally proposed to cover only teachers at junior-high schools and below — would also apply to senior-high teachers.